US Senate moves toward Internet sales tax vote

The U.S. Senate has moved toward a vote to impose sales tax on most Internet purchases, with lawmakers likely to vote to close debate on legislation next week.

On Thursday, Senate Majority Leader Harry Reid, a Nevada Democrat, filed a cloture motion to end debate and move to a final vote on the Marketplace Fairness Act, which would allow states to collect sales tax on Internet sellers that have no presence within their borders.

The Senate is likely to pass the Internet sales tax once it comes to the floor. Twenty-eight of 100 senators are co-sponsors of the bill, and in late March, senators voted 75-24 for a nonbinding resolution to allow the Senate Budget Committee to include the sales tax in the U.S. budget.

Reid's move would allow the bill to move forward on an expedited schedule by skipping hearings. Supporters of the Marketplace Fairness Act have been trying for years to get a bill passed in Congress.

A 1992 Supreme Court ruling prohibits states from collecting sales tax from sellers that have no physical presence within their borders. But the court signaled that Congress could allow remote sales taxes if states created a simplified tax collection regime.

Forty-six states have sales taxes, and all require residents to report purchases they make from websites and catalogs and pay sales tax. But many buyers don't know of those rules, and others ignore them.

Supporters of the bill argue that brick-and-mortar businesses have a significant disadvantage because they have to charge a sales tax of 5 percent to 10 percent, while many Internet sellers do not. Internet sellers that also have a store in a buyer's state do charge sales tax, and some e-commerce sites, including Amazon.com, have begun to voluntarily collect sales tax for some states.

But critics, including eBay and the NetChoice e-commerce trade group, say a nationwide sales tax system would be difficult and costly to implement. There are about 10,000 taxing jurisdictions in the U.S., with many different rates of sales tax and many different lists of what's taxed and what's not.

True Simplification of Taxation (TruST), a coalition opposed to the sales tax, called on Congress to require states to simplify their sales taxes before passing the bill.

The bill would "install an untested system run by state tax auditors and impose significant new regulatory burdens while exposing businesses of all sizes to new audit threats from dozens of state tax auditors," the group said in a statement.

The National Retail Federation voiced support for the bill, saying it would "level the playing field" for all retailers and allow states to collect their own sales taxes.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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